Stock Market: CNBC Report

Intermediate counter trends or rallies against a major down trend have very
similar characteristics no matter the market. They do not test the low; the
retracement of the move down is 1/3 to 3/8. The time runs approximately 90
calendar days but can run out to 144 days on rare occasions. There are three
tests of the upper level of resistance followed by a lower high or two lower
highs. This is followed by a fast move down to break the lows.

This move has done everything but the third test. But there is now in place
a possible lower double top with a 5 day struggle up into the last lower high.
If this takes off down now and moves through the last low in a few days it
could indicate the completion of a counter trend. I have been waiting for a
clear third test by maybe in this instance it may not be necessary. I am still
hoping for a third test but you may want to watch this for a few days. This
could be a catalyst for a further spike up in stock indexes.

NOW LET'S LOOK AT THE GOLD WEEKLY CHART

You can see there was a huge exhaustion move March through May of 2006. This
is the same pattern of trending that is now going on in the stock indexes.
Gold then had a fast reversal down and a big 3 week retracement. This was followed
by a 12 week struggle down to successfully test the low that started the 3
week rally. The market is now up 28 weeks and was a weak trend up. I said weak
because the retracements of each 7 week rally have been large and the last
rally has been weaker than the previous two rallies. A big three thrust structure
below a spike high can be a large distribution pattern. I would prefer to see
a marginal new high to complete the pattern, but this is something to keep
an eye on for the next few weeks.

LET'S LOOK AT THE S&P 500 INDEX DAILY CHART

There have been 3 down days with the last day reversing back up after running
down. If it cannot extend that reversal back up today it will likely make a
run down to successfully test the "obvious" old high. If it can move higher
it will be doing so from a 3 day move down which does keep the fast trend intact.
It still looks like this is the start of some sort of congestion or consolidation
before the final push into the June 12th high. If we look at previous exhaustion
legs of similar circumstances they run 15% to 22% and that yields a minimum
move to 1568, so there is still more of this fast trend between now and June.

Disclaimer: This message is for educational purposes only and does not constitute
trading advice nor an invitation to buy or sell securities. The views are the
personal views of the author. Before acting on any of the ideas expressed,
the reader should seek professional advice to determine the suitability in
view of his or her personal circumstances.